Financial Inclusion In India

FINANCIAL INCLUSION IN INDIA AND

National Bank for Agriculture and Rural Development

(NABARD)

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Presentat ion by Shri U.C . Sarangi , Chai rman, NA BAR D & Shri S. K.Mi tra, Executi ve Di rector, N ABAR D

History of strategies for Inclusive Growth/ Livelihood improvement/ Financial Inclusion in India •

Phase I (1960 – 1980) − − − − −

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Social control of Banks – (1960) Nationalisation of Banks – (1969) Setting up of Regional Rural Banks – (1975) Priority sector lending stipulation by RBI - (1972) Lead Bank scheme – (1969)

History of strategies for Inclusive Growth/ Livelihood improvement/ Financial Inclusion in India •

Phase II (1980 – 2005) − Integrated Rural Development programme/ SGSY promoted by Govt. Of India − Microfinance programme– SHG – Bank linkage facilitated by NABARD

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Phase III (2005 onwards) − Development of MFIs − Financial Inclusion in a “MISSION” mode

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Formal Bank Network In India Reserve Bank of India

Government of India NABARD

Public Sector Banks (28) Rural Semi-urban Urban Metro Total

18,197 11,736 10,247 9,726 49,906

RRBs (96) LABs (4) 11,444 / 5 2,481 / 14 522 / 11 59 / 0 14,506 / 30

Private Credit Banks (24) Cooperatives 987 2,077 2,102 1,901 7,067

SCB – 31 DCCB – 367 PACS – 108779 SCARDB – 20 PCARDB - 727

13,104 NBFCs registered with RBI. 1853 Urban Co-operative banks with 7217 branches.  Foreign Banks Urban – 43, Semi Urban – 2, Metro –

227. (Total 272)

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NSSO – 2003 Findings of Survey 



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51% lack access to Financial Services from formal system Exclusion predominant amongst: -- Poor and weaker sections -- Resource poor regions

SHG - Photo

Largest Financial Inclusion programme in the World    

58 million poor households provided access to banks through 3.48 million SHGs. Savings of SHGs with banks $ 703 million. Bank loans availed by SHGs $ 2473 million NABARD Refinance support $1412 million NABARD Promotional support $5.5 million

•SHG- Bank Linkage programme in India facilitated by NABARD, implemented by Banks, NGOs, Government agencies 6

Financial Inclusion - Definition “The process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.”

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Financial Inclusion eventually to include the following services − − − − − −

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Savings/ Thrift Loans/ Credit Remittance / Transfer of Funds Micro Insurance Services (Life and Non- Life) Mutual Funds/ Annuity Products Pension Products

Creation of Funds with NABARD in 2007 08  Financial

Inclusion Fund (FIF) – Rs 5000 million  Financial Inclusion Technology Fund (FITF) – Rs 5000 million  Govt. of India : RBI : NABARD (40:40:20)

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Objectives of FIF The objectives of the FIF shall be to support “developmental and promotional activities” with a view to securing greater financial inclusion, particularly among weaker sections, low income groups and in backward regions / hitherto unbanked areas.

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Objectives of FITF The objectives of the FITF shall be to enhance investment in Information Communication Technology (ICT) aimed at promoting financial inclusion, stimulate the transfer of research and technology in financial inclusion, increase the technological absorption capacity of financial service providers / users and encourage an environment of innovation and cooperation among stakeholders. 11

Technology Solutions being tried in India  Smart

card, hand held terminal, central

CPU  Low cost ATMs  Mobile Phone Banking  SMS Banking  Public Call Office (PCO) Connectivity.

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Way Forward

Targets fixed for each Branch of Commercial Bank/Regional Rural Bank to : – Open 250 accounts every year – Issue 100 Farmers’ Credit Card – Issue 100 General Credit Card – Distribute 100 micro insurance policies

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Way Forward (contd/-)

Micro Finance Sector (Development and Regulation) Bill, 2007 under consideration.  Setting up of Rural Credit Information Bureau.  Ensuring effectiveness of Business Facilitator(BF) /Business Correspondent(BC).  Micro

finance Development and Equity Fund  Micro finance Ombudsman  Regulatory and developmental power to NABARD 14

THANK YOU 15